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A Change in an Input Price Will Alter Both Production

Question 206
Multiple Choice
arrowQuestion 206arrow
Multiple Choice

A change in an input price will alter both production costs and the profit-maximizing output. Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor. This describes the

A)output effect.
B)substitution effect.
C)idea of derived demand.
D)law of diminishing returns.

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